The harsh reality of currency depreciation against gold

Since the dollar went off the gold standard, the metal has appreciated against the dollar by more than 50 times in 42 years. After the Fed announced QE3, China also indicated it would stimulate when needed and the Eurozone got the go ahead for bond-buying where necessary.

Julian Phillip
Posted: Thursday , 20 Sep 2012

After QE3 came out last week in the US, China also indicated it would stimulate when needed and the Eurozone got the go ahead for bond-buying, where necessary. Japan has now joined the foray and is stimulating to the extent of $126.7 billion. This caught the world by surprise but explained why gold was buoyant ahead of London's opening. The yen is weakening as a result.

The Yen is still being treated though as a ‘safe-haven' currency even though the Bank of Japan has made it clear that it will engineer a weaker Yen for a long time now. The same is true of the Swiss Franc, with both countries placing their export competitiveness above the value of their currencies. The concept of any currency as a measure of value has now departed completely.

Such currency market changes leave room for gold and silver to act as that measure of value, as currencies fall against them. This also enhances investor's views of the precious metals being the only place to retain wealth.

During the 42 years of the "currency experiment" with no gold or silver standing behind currencies we have seen the gold price multiply from $35 to $1,770. That's over 50 times in 42 years. And there's still much more to come it seems, with the assistance of governments. If one was fortunate to get out at anywhere above $800 back in the eighties and back in at $300 that number goes up to 64 times $35. That's better than trading and less nerve racking.

But don't look at that as a profit figure. Look at it as a statement on the failure of the currency experiment and currencies' ability to measure value. Now translate that into the value of savings over that period. What a harsh reality!

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